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Fannie Mae: Affordability fears affecting housing inventory

Consumers concerned about buying a new house are less likely to list their current home

Fannie Mae’s national housing survey from last year found that consumers believe that housing in their area is becoming less affordable and more difficult to find, contributing to their lack of enthusiasm to move.

According to the survey conducted in the third quarter of 2021, 69% of participants share these sentiments. This marks a 20-plus percentage increase in consumer perception compared to five years ago, when only 45% of participants felt this way.

A blog by two Fannie Mae researchers — Rachel Zimmerman, market research advisor, and Kim Betancourt, senior director of economics and multifamily research — published this week said that consumer perception around housing affordability is in part contributing to inventory constraints.

The authors argue that homeowners may feel that their current housing costs are affordable in an otherwise unaffordable area, dissuading them from looking at other properties.

 “While this can be true for either homeowners or renters, in our view homeowners probably feel this pressure a bit more acutely, since a stable, affordable mortgage payment would likely disincentivize many from selling and having to go through the purchase process again,” the researchers said in the blog post.

By some accounts, housing inventory in America hit an all-time low in December 2021. The lack of inventory has been a pressing problem for a number of years, in part exacerbated by building delays caused by supply-chain pressures and building materials shortages.


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Presented by: Finance of America

The survey found that a whooping 92% of mortgage holders think that their current home was “somewhat affordable.” This sentiment might be a driver for disincentivizing people from listing their homes, Fannie Mae’s researchers said.

This perception has likely “constrained the supply of homes for sale and made it even more difficult for potential first-time homebuyers to take advantage of low mortgage rates and escape record-high rent increases,” the blog said.

Mortgage rates have sky-rocketed in the last couple of months, with Freddie Mac’s most recent survey showing that mortgage rates crossed the 5% threshold. The notable rise may further discourage homeowners from listing their properties, or looking for other housing alternatives.

Mark Palim, deputy chief economist at Fannie Mae, said that rising rates will “undoubtedly have an impact on listings.”

“We know from the past that that when mortgage rates move up significantly, rapidly in a short period, that home sales slow,” Palim said. “So you know, people who have a 3% mortgage or a 3.5% rate mortgage. They’ve got to take that into account, right? They’re not going to want to give that mortgage up easily.”

The 2021 survey found that consumers who did express the desire to move were driven by work/personal lifestyle, rent prices going up, and wanting more outdoor space.

Per Fannie Mae’s data, rent prices increased by 10% in 2021 alone and prices are expected to increase by 4% to 5% in 2022. This is pushing renters to consider buying a house, the blog said. And many renters are eyeing rural areas as an oasis for affordable housing options.

The researchers conclude that the insights from the survey suggest that the availability of homes or rental properties in slightly less dense areas “would likely be welcome relief for many households,” the blog reads.

“But with single-family housing prices expected to increase by 7.6% in 2022, as measured by the FHFA Purchase-Only Index, after rising an astonishing 17.6% in 2021, both current and potential homeowners may continue to have difficulty purchasing a home,” the researchers wrote.

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